loading3.8
If the forward price of a currency contract is higher than the spot rate, the currency is said to be at a ________.
a. b. c. d.
forward discount forward premium
future expected exchange rate forward swap rate
Forward premiums and discounts, p.90
3.9
If the forward price of a currency contract is lower than the spot rate, the currency is said to be at a
a. b. c. d.
forward discount forward premium
future expected exchange rate forward swap rate
Forward premiums and discounts, p.90
3.10 What is a spot-forward swap?
a. the purchase of foreign currency spot against the sale of the same amount of foreign
currency forward
b. the sale of foreign currency spot against the purchase of the same amount of the
foreign currency forward
c. both the purchase or sale of a foreign currency spot against the sale or purchase of
the foreign currency forward
d. the purchase of a foreign currency forward contract at the outright rate
Forward premiums and discounts, p.91
3.11 What is the term for the conditional mean of the probability distribution of future spot
rates?
a. b. c. d.
the expected swap rate the future exchange rate the outright rate
the expected future spot rate
The probability distribution of future exchange rates, p.72
3.12 If the Euro is selling at a premium relative to the USD in the forward market, is the
forward price of USD /EUR larger or smaller than the spot price of the USD /EUR?
a. b. c. d.
larger smaller
indeterminate the same
The forward foreign exchange market, p.81
3.13 If the USD is selling at a discount relative to the yen in the forward market, is the forward
price of JPY/USD larger or smaller that the spot price of the JPY/USD?
a. b. c. d.
larger smaller
indeterminate the same
The forward foreign exchange market, p.81
3.14 What is the name of the action that uses derivative securities to reduce risks arising from
underlying business transactions in financial markets?
a. b. c. d.
Forward contracts Hedging Forward rates Speculating
Forward contracts and hedging, p.74
3.15 Why are the bid-ask spreads larger in the forward market than in the spot
market?
a. b. c. d.
Because the forward market is less liquid than the spot market. Because the spot market is more volatile than the forward market. Because the forward market is more liquid than the spot market. Because the spot market is less liquid than the forward market
Forward market bid-ask spreads, p.83
3.16 Which one of the following options is not a type of swap?
a. The sale of foreign currency short-term forward against the purchase of foreign
currency forward.
b. The purchase of foreign currency short-term forward against the sale of foreign
currency long-term forward.
c. The purchase of foreign currency spot against the sale of foreign currency forward. d. The sale of foreign currency short-term forward against the purchase of foreign
currency long-term forward.
The foreign exchange swap market, p.87
3.17 One of the major reasons for the existence of the forward market is to ________.
a. b. c. d.
provide a location for all currency traders to assemble and trade manage currency risk especially risk associated with a transaction hedge transactions involving foreign currency that occurred in the past prevent default in the transaction
Introduction, Forward Markets, p. 67
3.18 When does delivery occur on a 90-day forward contract?
a. in 90 days corresponding to two business days preceding the third Wednesday of the
month
b. immediately but the contract is not closed for 90 more days
c. in 90 days corresponding to the calendar date of the spot value date d. two business days following the spot value date
Forward Contracts and Hedging, p. 74
3.19 What is meant by the conditional future spot rate?
a. b. c. d.
the forward rate
the forecasted future spot rate
the conditional variance of the probability distribution of future spot rates the conditional mean of the probability distribution of future spot rates
Probability Distribution of Future Exchange Rates, p. 72